The Empirical Analysis Of Herd Behavior In Chinese Stock Market Based On The CCK-GARCH Model

According to the "hypothesis of rational man" of traditional economic theories,investors will rank the utility of alternative combinations based on all relevant information,and choose the combination which can bring the greatest utility to themselves.A rational investor is characterized by rational expectation,risk avoidance,proficiency in computing and judgment,and unbiased estimation of all information to pursue maximization of his own interests.The "hypothesis of rational man" and the "efficient market hypothesis"constitute the basis of modem classical financial theories.In fact,however,the modem classical financial theories based on these two hypotheses cannot offer a reasonable explanation to many abnormal problems arising from the financial market.This suggests limitations of the application scope of classical financial theories.After a full observation of and reflection on the market,scholars start to seek breakthroughs of traditional financial theories from the perspective of behavioral finance.As a typical phenomenon of finance,the herd effect has become a general research interest.China's securities market started late,which has still been immature compared with the share market of developed countries,and sharp drops and rises can easily happen.In 2015,the share market price dropped by 1,757 points in 17 transaction days,which was unprecedented.Worse still,the phenomenon of 1,000 shares dropping appeared.While examining the occurrence of this phenomenon,scholars cannot help thinking about whether the herd effect is a reason for this phenomenon.This paper makes use of the CCK-GARCH model to empirically and comparatively study the herd effect of the large-scale share and the small-and medium-scale share represented respectively by the SSE 50 Index and the SSE Medium-and Small-scale Share.Based on the above analysis results,the trading volume model is added to further investigate characteristics of the herd behavior.Empirical results suggest that the herd effect widely exists in China's share market.To be specific,the herd effect is more obviously in the dropping period.Meanwhile,the herd behavior of investors is usually signalized by the trading volume.Finally,the causes of the phenomenon are discussed based on the above analysis results,and the suggestions are made for the investors and the supervisory departments,respectively.